However, growth was predicted to hit 6.3 per cent next year thanks to an increase of consumption and credit demands, said the Chief Economist of the World Bank’s East Asia and Pacific Region, Sudhir Shetty.
Exports would also increase following the signing of free trade agreements, he said.
According to the report, Vietnam’s economy has proven resilient amidst slower global growth. Economic activity in the country stayed moderate in the first three quarters this year due to a severe drought and slower industrial growth.
However, macroeconomic stability was maintained and inflationary pressure remained low.
The report showed that while Vietnam continued to reduce poverty, the decline in agriculture posed short-term risks. Households that rely on agriculture for income have been particularly vulnerable.
In the medium-term, the outlook remains positive. But easing macroeconomic vulnerabilities and sustaining higher medium-term growth would need bolder structural, fiscal and banking reform, the report said.
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| Workers in a textile production assembly in Phu Nghia industrial park in Hanoi’s Chuong My District. VNA/VNS Photo Danh Lam |
According to the WB report, growth in East Asia and Pacific will remain resilient over the next three years.
However, the region still faces significant risks to growth, and countries must take measures to reduce financial and fiscal vulnerabilities.
Over the longer term, the report recommends that countries address constraints to sustained and inclusive growth by filling infrastructure gaps, reducing malnutrition and promoting financial inclusion.
Overall, East Asia was expected to grow at 5.8 per cent in 2016 and 5.7 per cent in 2017-2018.
“The outlook for developing East Asia and Pacific remains positive, with weakness in global growth and external demand offset by robust domestic consumption and investment,” said Victoria Kwakwa, World Bank Vice President for East Asia and Pacific.
The report offered a comprehensive analysis of the outlook for East Asia and Pacific against a challenging global backdrop, including sluggish growth in advanced economies, subdued prospects in most developing economies and stagnant global trade.
The report expected domestic demand to remain robust across much of the region. Continued low commodity prices would benefit importers and kept inflation low.
“The long-term challenge is to sustain growth and make it more inclusive, including by shrinking gaps in income and access to public services, especially in China; improving infrastructure across the rest of the region; reducing persistent child malnutrition; and harnessing the potential of technology to stimulate financial inclusion,” said Kwakwa.
